As of May 2021, over 50 psychedelic companies trade on public markets in the US, Canada, Australia, and the UK, with many more scheduled to IPO over the next several months.
For investors looking to gain exposure to this rapidly growing market, there are dozens of quality companies to pick from. Companies like Lobe Sciences, Mindset Pharma, Silo Pharma and several others have all filed patents in the past year, giving these businesses a potentially lucrative future.
But for retail investors at home, there’s still one big problem – at least in these early stages…
Despite all the “hype,” most companies in the space still don’t have any actual products in the market. In other words, they have no way to generate meaningful revenue.
There are literally dozens of public psychedelics companies that have filed patents, developed proprietary molecules, and/or are currently working on major studies. All of these activities may be extremely valuable in the future, which will likely boost stock prices significantly.
But that’s only if those companies are able to deliver on what they are working on.
Nobody knows who the winners of this market will be. Not yet. It’s why in the past we’ve suggested diversifying your investments across the sector – to think like a VC.
What we do know, however, is that the timeframe for company initiatives to turn into real profits on the balance sheet could be longer than the market may be willing to tolerate.
For new investors in this market, perhaps any investment should be with a longer time frame in mind, allowing for drug developments and/or patent approvals to take place.
A Note For The Traders…
What about investors who want to do short term trades? This kind of investing requires a high volume of shares being traded everyday, with total daily traded value in the tens of millions of dollars.
Realistically, there are only three companies that can be day traded with confidence: MindMed, COMPASS Pathways, and Seelos Therapeutics. These three companies currently trade on the NASDAQ exchange, and have by far the largest amount of daily value traded in comparison to the rest of the market.
Still, the top traded psychedelics companies don’t break over $20 million per day in trading volume. Compare that to a company like Apple, that can have tens of billions of dollars exchanged in a single day.
When we look at all the publicly traded psychedelics companies in our index, there are 41 companies that have a total daily trading value of less than $100,000. Of those 41, there are 15 companies that each trade less than $10,000 per day.
Any investor who takes a sizable position in these less traded companies will have serious problems liquidating based on today’s trading volumes.
While low trading volumes in most psychedelics companies isn’t necessarily a bad sign, it does indicate what kind of investors are allocating money to this exciting industry.